Automation enables founders to grow companies with fewer and fewer employees

https://twitter.com/paulg/status/1600119268858744832

by tosh • 4 years ago

250 373 4 years ago

notlukesky2• 4 years ago

It is important to point out that this is only possible for the consumer app economy or a self-service type of software app or digital marketplace (like craigslist). Everything else requires more headcount (could be outsourced to 3rd parties or consultants). And in the whole economy this is a sliver of companies.

This is a great business of course but there are not many of them given the scale of the whole economy.

Before the Internet, the closest to this was creators or inventors living off of patents, license or copyright fees.

LeonM3• 4 years ago

This is a great business of course but there are not many of them given the scale of the whole economy.

This is a very good point to emphasize. Most readers here on HN work in IT and are thus inherently biased.

The reality is that the majority businesses rely on having a workforce of humans.

czbond3• 4 years ago

I wholly disagree. SaaS are similar to automations for end customers.

The CapEx spend of tens/hundreds of engineers that built the SaaS is offset by 1 company to remove the needed engineers from each company.

Companies used to: build their own authentication layers, databases, infrastructure, code repositories,etc, etc.

What starts in consumer always moves to Enterprise. So will AI and automations.

notlukesky2• 4 years ago

Maybe it wasn't clear but I was referring to low-touch SaaS as well with "self-service type of software app". There are low-touch SaaS apps and offerings serving the developer and some "enterprise" market segments. The problem with certain enterprise SaaS is that they are high-touch by the very nature of the sales process involving big-ticket items. Once you are in the territory of high ACV there are many sales "gatekeepers" ranging from pay-to-play analyst coverage, Vegas conferences and outings, tickets to NFL games, to compliance and regulatory hurdles.

I should have also mentioned hedge funds who manage billions with relatively few head count and they use automation tools extensively starting with the spreadsheet in the 1980s.

yobbo3• 4 years ago

Not really. Any business can now use tools that make jobs redundant. It is having its effect everywhere. Anyone whose job is to copy information between mails, spreadsheets, and some webapp will eventually be replaced.

There are more "psychological gotchas" among non-software people about what "real jobs" are and what it means to create value, but time catches up with everyone.

FredPret3• 4 years ago

I’m creating a startup. I’m the first and only employee, and likely to remain that way for the foreseeable future.

What would have taken an army of clerks in the past is now a (lot) of code. Whole departments are replaced by API’s that cost less than $100/month.

It’s really incredible.

bluelightning2k2• 4 years ago

Could you give some examples? Congratulations on your success implementing this stuff

FredPret3• 4 years ago

Congratulate me when it finally works out!

I’m still in stealth mode. My startup is super simple in concept - I gather a particular type of data, clean it, process it, and serve it to subscribers. Some of my data sources are free, some are paid API’s.

All the processing is done in code. You would need an army of people to read all that text, a layer of bureaucracy to manage and check them.

testmasterflex4• 4 years ago

https://loodio.com - Hardware company - Solo founder - No employees and same here; I don't see the need for any in the forseeable future. Don't even need capital as my burn rate is ~$50/month except when I order new stock. Weird times.

satvikpendem7• 4 years ago

The book The Million-Dollar One-Person Business goes into a lot more examples. It's usually people who build software that can scale.

yetanotherforg15• 4 years ago

Based on his argument: Fewer people are doing a lot more thanks to being good at automation. It's the automation that's making it possible to be successful, not the engineers doing the automation.

The past three years, the YC crowd has really tried hard to justify wealth disparities, gentrification and generally treating employees like garbage, as part of their Objectivist agenda.

Paul, employees do the automation, not the founders.

CalRobert• 4 years ago

I don't follow? Lots of technical founders create their own automations.

yetanotherforg15• 4 years ago

His whole point is: There is a lot of great free open source software being exploited by small technical teams to run faster. This means the people doing the integration deserve less $$ because they can do the same amount with less. Founders deserve all the money, everybody else should be happy to be employed.

1920s robber baron bs.

Ignore the ethics that every single startup would be impossible without standing on the heads of those who have dedicated many hours of their lives building this free software.

wittycardio8• 4 years ago

Pretty clear that these are people who want to fuck you over. Silicon Valley elites have accumulated enough power to come mask off. Entitled dirtbags who profited off government funded science and technology who've never created an ounce of value in their lives.

yetanotherforg15• 4 years ago

Thank you. Nobody ever seems to mention how much founders get to stand on the heads of engineers and scientists who were paid with tax dollars. Kind of how the libertarian musk fans ignore how much aid his companies have gotten from the t taxpayers.

In the heads of somebody who believed The Fountain Head and Atlas Shrugged were bibles, there are 1 or 2 people doing 99% of all work in the companies.

timmytokyo2• 4 years ago

It does seem a bit tone-deaf for pg to be making this argument at the precise moment tens of thousands of people are being laid off in the tech industry. Definitely a "mask off" moment. Either that, or he has a large equity stake in a manufacturer of pitchforks.

robertlagrant8• 4 years ago

It's the automation that's making it possible to be successful, not the engineers doing the automation.

That's like saying anyone who thinks hammers are a good idea is really saying a hammer makes a builder successful, not the builder. It's just a tool, and he's saying tools mean one person can do more. You don't need to straw man a philosophy on to it to then have something to argue against.

employees do the automation, not the founders

Founders normally are employees. For the phase or type of company pg is talking about, they may be the only employees.

yetanotherforg15• 4 years ago

Can you explain how Founders are employees in this context?

I read this as pg being focused on justifying post-acquisition wealth. It seemed to be a justification for the founders receiving 100s if not 1,000s of times the level of compensation as the workers.

I would be curious to hear more justifications from him for this. Founders really take far less risk than employees. I say this as someone who missed out on about $75 million from a YC start-up when an unnamed higher-up told them to fire me two weeks before my first vesting, because I had the most amount of non-founder stock in the company (a compensation for which I took a 66% salary cut).

(edit, typos and turned 100s into 1,00s)

the_optimist• 4 years ago

Stop stealing the internet bits from Claude Shannon. He did the work and deserves his cut.

fleddr3• 4 years ago

The idea that the fruits of automation should be awarded to the single guy on top is ridiculous, and that's not communist thinking.

The idea of automation is that we should advance as society. The very point of it is that we need to work less, but it never turns out that way because the benefits of automation are seized by the few.

Hence, we forcefully invent new labor regardless of purpose. Half of our economy is keeping each other busy with bullshit to keep this going.

And if that wasn't perverted enough, now the message is: actually, we don't need you. At all.

dang• 4 years ago

I've been around YC for 80% of its existence and have never observed anything that could remotely be described as an "Objectivist agenda". I'd remember it too, if I had.

As for "treating employees like garbage", that's just a baseless smear.

heisenbit• 4 years ago

If founding work is so simple then founders should be interchangeable? Where is the moat that ensures what two handful of people cobbled together is not replicated? Isn't it that the real moat and the real propelling force becomes more and more the capital leveraged?

wittycardio8• 4 years ago

Most Founders are interchangeable. The entire business of YC is paying for a ton of people to found a ton of companies and hoping one hits. Luck is a huge factor. The issue is the 1 guy that does hit has an outsize impact on society. Sometimes it's positive but often it's not.

dandanua2• 4 years ago

It's frightening that people "at the top" write those things without even realizing how it sounds for ordinary people.

I think this delusion is on par with Marie Antoinette and her "eat cakes if you don't have bread".

beardyw• 4 years ago

What happened to the future, a 3 day week for all as computers/machines did the work.

LeonM3• 4 years ago

Because of the competitive nature of business (and humans).

If you can build a factory that can build products more efficiently, it means you can sell them cheaper then your competitors, meaning you can move more volume and thus make more profit. So you are definitely not going to run that new shiny factory for only 3 days a week.

Eventually, competitors will notice your improved output and react with their own improved factory. If you sit still in your shiny new factory, you will eventually be outpaced by competitors as they catch up.

In the end though, the throughput per human is greatly increased as computers and machines do (most of) the work. This has increased prosperity greatly.

Unless you can accept living with less then the competition, you are not going to work less then your competitors.

throwaway74829• 4 years ago

How would that stoke the egos of all godless psycopaths?

japanuspus• 4 years ago

This is the question I see way too few people asking: how do we want end-game capitalism to look. Should it be Banks' "The Culture", or should it be neo-feudal with the populace at large acting as serf to capital.

Without discussing the vision, discussing the strategy becomes sort of meaningless.

(Edit: typo)

adamsmith1434• 4 years ago

As awesome as The Culture sounds I find it unsettling that Humans basically become the exceptionally pampered pets of the Minds and at least right now it's unlikely we will create AIs as benign and benevolent as they are.

bluelightning2k2• 4 years ago

This isn't new. There's been 4 industrial revolutions.

But the most obvious example is electricity. People's output in certain roles immediately compounded and the long tail of this never really stopped (it was a precursor to the internet and AI ofc)

Where fields had to be toiled there was space for little else. But now people can scale their impact in interesting new ways

ceronman• 4 years ago

He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

If that's true, then what about a social experiment: If you are a solo founder, you get all your profits for yourself. But if you have employees, you have to share your profits with your employees. If employees don't produce any value, easy, fire them all, you get everything. But if they do, share your profits fairly.

I'm curious to see how many solo billionaires will appear. My estimated guess: zero.

jtgi• 4 years ago

No, negating “employees created all the value” does not mean, “founders create all the value”. It means employees didn’t.

adamsmith1434• 4 years ago

So who is the magical missing third party that created value?

jerrre• 4 years ago

Paying a wage = sharing your profits, just not on a % base, but a fixed amount. But in the end it's still: less profits for the founder, and more profit for the employee.

varispeed2• 4 years ago

Wage is a cost and profit comes after costs. If owner want's to share profit, they need to give company shares to the employees and pay dividends.

vasco• 4 years ago

Also this is not about a dystopian village with one single employer that exploits workers that cannot move. Startup employees agree with free choice to work somewhere for the agreed upon profit share, be that % based or fixed, or mixed.

VictorPath4• 4 years ago

The argument he is arguing against is that the workers create the wealth, and profit is that unpaid surplus labor time that the LPs/VCs/founders expropriate from the workers creating wealth. You can't "share" profits with workers when workers are creating all the wealth, the LPs/VCs etc. expropriate profits from workers.

roflyear5• 4 years ago

No not really. If I generate $1m of value for a company and they pay me $90k a year that isn't really sharing profit.

jmyeet2• 4 years ago

Are you familiar with "debt bondage"? Technically, the brick kiln workers of India and Pakistan are paid a wage [1]. Closer to home, Amazin warehouse workers probably wouldn't consider themselves as sharing in Amazon's profits. Let me summarize:

1. Debt is built into your existence (student, medical, housing, etc);

2. The system is designed to extract (exploit) value from labor; and

3. There is no value without labor.

[1] https://www.antislavery.org/what-we-do/past-projects/india-d...

shadowfoxx3• 4 years ago

This is a fun semantic game but Profits are not the cost of doing business. When you have an employee sign a contract for $X dollars per year, that's a cost. Conflating Revenue and Profit for the sake of an argument is bad faith.

My Assumption here is that the common usage of profit is, "Money after all expenses paid", which employee compensation is clearly outside of that definition.

CrimsonRain• 4 years ago

And I'm curious to know, in your model, if the employees are willing to work without salary and bear the cost of running the company?

osigurdson• 4 years ago

I think it could happen. AI and automation have the tendency of amplifying ability. The ideal company has zero employees. Similarity, the ideal world has zero employees and everyone does want they want. If that scares you, give your head a shake.

clevergadget2• 4 years ago

Yeah if work was so great you wouldn't have to pay people to do it

rqtwteye• 4 years ago

What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.

layer8• 4 years ago

Unfortunately they still crop up, with increasing frequency.

college_physics• 4 years ago

a "nice living" is actually quite hard for small businesses. competition is brutal, all sorts of risks can be fatal etc. the "billionaire adoration" phenomenon is actually putting lipstick on oligopolistic market arrangements and pretending they are still entrepreneurial

MuffinFlavored2• 4 years ago

If somebody can make a nice living with their business, isn't that good enough?

I think the allure of being a billionaire is it's "one and done". As in, once you achieve it, you can live the craziest life possible filled with lots of grandeur and not need to run any kind of business whatsoever after.

It's mainly a fantasy for people who are tired, overworked, underpaid, under-appreciated (which is like 85% of America I'm guessing).

"Wouldn't it be nice..."

oblio4• 4 years ago

What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.

https://news.ycombinator.com/

-> https://www.ycombinator.com/

Y Combinator created a new model for funding early stage startups.
Twice a year we invest $500,000 per company in a large number of startups.
We work intensively with the companies for three months, to get them into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience.

-> https://www.ycombinator.com/topcompanies/public

Sometimes I guess we just forget where we are :-)

oblivious7• 4 years ago

Check paulg’s tweet history. A few weeks ago he lamented how fake things are in the US, pointing at things like Kraft singles.

I don’t have a Twitter account but almost went to sign up to reply “billionaires whose wealth is based on mathematical inference not possession of tens of billions of real dollars.”

I say let’s automate away book smart, street stupid easily deluded normal humans who end up optimizing for themselves while roleplaying something more egalitarian is afoot with their games.

Letting a minority monopolize agency is not a greater good as there are no greater goods. It’s typical political corruption.

Automate away politicians, VCs, C*O level; organizing life in line with religious traditions is not sacrosanct. Why is organizing life under the prior 60-70 years so special? Ooh right; cause that cohort is where all the wealth is captured. Silly me.

Looks like it’s time to revisit Reagan’s policy of expropriating retirement for the youth to invest.

coldtea2• 4 years ago

Even better: let's see how many billioaire entrepreneurs will appear in a society where few or no people are there to buy their products and services, because they've made redundant and are out of jobs or in new lower-paying forced careers...

hrgten• 4 years ago

Eliminating the middle class (except for those who directly serve the billionaires) and having a huge industrial reserve army (Marx) that does jobs that cannot be automated could work. It works for the super rich in Brazil.

This seems to be the trend in "Western" societies, and the middle class enthusiastically votes for those who pursue that agenda.

ThePhysicist2• 4 years ago

Isn't Notch [1] a solo billionaire? Not sure if he had help running Minecraft (I guess so), but you could say he created a billion-dollar company single-handedly.

1: https://en.wikipedia.org/wiki/Markus_Persson

pram• 4 years ago

Mojang had employees.

enragedcacti• 4 years ago

He wasn't even working on Minecraft when Mojang sold to Microsoft. Jens Bergensten was the lead developer for years before the sale went through.

zmxz3• 4 years ago

What if I'm a founder who's also a developer, I have the idea, customer base and I've done ~80% of the code of the product but I need help with deploying and scaling the product.

How much of the profit do I share with the employees? What does the society deem fair in the case where founder comes up with the product, identifies the problem and works with the customer to configure the product? Do I get to take 5 salaries or 1 salary?

JustSomeNobody• 4 years ago

How much value do you place on "scaling"?

You wrote 80% of the code (who wrote the rest?) and you got it deployed. You're making a decent living on 15.000 users. "Scaling" guy comes in and "scales" you to 150.000 users. Do they get an order of magnitude more profit than you?

edouard-harris• 4 years ago

While it's true he's saying that founders can create a lot of value without employees, he's certainly not suggesting employees don't also create value. Obviously they do, or founders wouldn't hire anyone.

if you have employees, you have to share your profits with your employees

Needless to say, this already happens via equity and options. There's a reasonable debate to be had over what constitutes "fair" profit-sharing. But the market clears where it clears, and individual tech employees definitely have meaningful leverage even under current macro conditions.

zajio1am• 4 years ago

For value creation, you need both workers and capital (provided by founders and investors). The value is created by both together, not each independently. The compensation for created value is based on market rate for both work and capital.

yamtaddle• 4 years ago

The compensation for created value is based on market rate for both work and capital.

This equivalence doesn't make much sense unless there's a widespread phenomenon of businesses "firing" owners in favor of other capital-providers who will accept lower returns.

memish3• 4 years ago

He's not implying that employees don't create value.

Startups share equity with employees. The earlier you are there, the more you get, in part because of the inherent risk.

This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

If the company ends up being valued at 100B dollars, guess what, the founder and maybe some early employees are billionaires or hundred millionaires.

rojobuffalo• 4 years ago

Maybe there is an imbalance of risk taken or value added among founders and early employees. I think that's debatable, but assume it's true. It's never reasonably accounted for in the equity distribution.

It would be one thing for a founder to have 3x the equity of an early hire, but it is commonly more like 60x or 300x. Instead of a dozen people being able to cash out and support their families for the rest of their lives, one or maybe two people get to have many multiples of that and the rest barely make progress towards retirement.

ryandrake2• 4 years ago

This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.

Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".

fnordpiglet• 4 years ago

His assertion is made worse by automation. Every skill the founder can automate they should. That’s efficiency. Every skill they can’t, that’s a crucial skill the founder depends on. The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity. This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on, but even if they did have the skill - I think this is a population that understand the sheer amount of time and energy automation requires to simply oversee, operate, and maintain. The founder can’t be on call 24/7 for every function of every part of any but the most trivial of operations. Finally, typical ownership rules makes the founder highly enriched in equity unless they trade equity for capital or talent to the point they lose control. That controlling equity is the founders reward for the founding. Their share of growing profits is their reward whether they personally grow the profits or their employees do. A smart founder doesn’t try to do it all just so they can squeeze out some other people. They delegate responsibility to employees who in turn find ways to outsize the growth of profits and the value of the equity. Nothing says the founder needs to treat them well or provide them incentive to succeed - but everyone who has ever grown a company knows the best talent is attracted to where they are a “part” of the success, which includes sharing in the reward of their labor not just the labor.

rbanffy• 4 years ago

The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity

Unless the providers of said ability have to compete for business on price. One should not underestimate how hard it is to replace them.

danenania5• 4 years ago

"This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on"

While that's true, I think it also pushes the profile of the ideal founder much more to the technical side than where it is now.

Creating and maintaining automations is inherently difficult-to-impossible to fully automate, and will likely always require some level of engineering skill.

Conversely, many of the most important skills a "business founder" brings to the table are also the most ripe for automation. Marketing, sales, administrative tasks, investor pitches, support, accounting: all have the potential to be automated to a large degree by AI.

mbesto• 4 years ago

But if they do, share your profits fairly.

How do you determine how much profit an employed CTO makes versus a customer service rep? What's fair there? My estimated guess: you have no idea.

JamesBarney2• 4 years ago

He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

It seems like he definitely believes founders create a lot of value, but I don't think he is making the second claim that employees don't create value. Just making the argument that the outsized return to founders is fair because they are creating far more value as evidenced by automation.

chubot• 4 years ago

FWIW the reply by the founder of repl.it explicitly takes the other side of the bet

I expect $1B solo founder startups to become normal pretty soon

https://twitter.com/amasad/status/1600143003607105537

(I honestly don't know -- not my area of expertise, just putting it up for discussion)

xcambar• 4 years ago

If employees don't produce any value, easy, fire them all

Very Musk-y of you

pr337h4m• 4 years ago

I'm curious to see how many solo billionaires will appear. My estimated guess: zero.

Satoshi Nakamoto is (most probably) a solo billionaire

necovek5• 4 years ago

Not unless they start converting their bitcoins into actual money, when lots of it might go down in value. If they even have access to secret keys that control these funds.

And obviously, even if they were a billionare, their ultimate goal was not to develop a business where they become one, but they were probably supporting their idea by being an early miner.

diob• 4 years ago

It's funny because so many acquisitions are built around getting the employees.

necovek5• 4 years ago

Many are also built around acquiring the market share/user base.

overrun117• 4 years ago

Aren't we just back to rehashing vapid Marxist arguments? In your experiment a brilliant computer scientist working on a breakthrough invention will be forced to do menial tasks like data entry and accounting him/herself rather than split the profits evenly with a laborer. This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.

NhanH• 4 years ago

This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.

Which is exactly why Marx makes his “vapid” argument: cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted). And the way society currently evaluate those values seems to be incorrect.

The issue with Marxist is that the solution he proposed is troublesome, not that the problem doesn’t exist. And until the next genius figures out a different solution, we should at least try to limit the problem as much as possible

downrightmike• 4 years ago

Seems like he took the red pill right after elno.

lolinder5• 4 years ago

He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

I agree that Paul is severely overstating his case here (as is his wont), but only the first half of your summary is true to his tweet. He's saying that founders create a lot of (even most of) the value in a company, but he is not saying that employees create no value.

His argument is essentially this: If employee jobs can in theory all be automated away while a company still produces value, that means the startup founder's role must produce a huge amount of the value in any company.

This is a pretty fragile argument that has a lot wrong with it (that a job can be automated today doesn't mean it wasn't extremely valuable yesterday), so there isn't really a need to erect a straw man.

janalsncm• 4 years ago

I believe what you’re describing is a worker-owned co-op. Workers get a vote in business decisions.

They have some interesting properties and I wonder how they would stack up against a top-down structure like in a corporation or university. Specifically I wonder if they would be able to resist bureaucratic bloat and the growth of the managerial class that plagues mature companies and organizations.

koonsolo• 4 years ago

Here's another experiment: All employees share the losses as well. Company makes a huge loss, employees are liable.

codegeek• 4 years ago

My experience is that employees just for the sake of employees are of no use and a lot of companies have too much fat just because they could hire. Great employees though are worth every penny and a whole lot more.

As a small company, I have hired and fired few people over the years. When I made the wrong hire, it cost a lot not just in terms of money but the overhead, mental anguish and loss in productivity. Sometimes I got lucky and hired some exceptional people. They have made life 2x better and yes they do get rewarded accordingly at least in my company.

Not all employees produce equal (even if same job title and experience on paper) and it is a fact.

neonate• 4 years ago

and that the claim that employees also create value is false

The claim he says is false is "their employees created all the value".

Replacing "all" with "also" produces almost the opposite statement. I don't mean to be pedantic but that's an extreme misinterpretation.

kasperset• 4 years ago

Automation always reminds of this quote from Jurassic Park:

" John Hammond: You're right. You're absolutely right. Hiring Nedry was a mistake, that's obvious. We're over-dependent on automation. I can see that now. Now, the next time, everything is correctible... "

fredgrott• 4 years ago

I would state fewer named employees, not fewer employees as the people creating the infrastructure automation was still employees of you in both focus and impact, etc.

Saying that they do not exist is just inviting being blind-sided by movements in that automation beyond your control.

tluyben2• 4 years ago

This is fine as long as this type of automation and less dependence opens up more founders making more products doing more for humanity.

spicymaki2• 4 years ago

I don't know if I want to bet my life on that.

ThePhysicist2• 4 years ago

Given the current market I'd say you have to achieve some basic success before hiring anyone, at least if you're bootstrapping. From my experience it's quite difficult to find early-stage employees that are both affordable and good enough to handle the breadth of technical tasks needed in the early phase of a business.

So, yeah, automation can take away a lot of pain, and how far you can get really depends on how well you automate specific aspects of your business. My takeaway after several SaaS products is that you have to optimize for minimal customer interaction from the start, otherwise you'll drown in support requests once you hit product-market fit. Stuff like billing, subscription management etc. should be solvable in self-service processes for customers, and if you see a speficic support issue more than 5 times in a given week you should ask yourself if you can automate it away or change the product so it won't happen again.

theturtletalks2• 4 years ago

I automated my e-commerce business and turned that into a SaaS. Found customers organically and have become my own “customer” multiple times. Solo founders like me are on the rise and you’d be surprised how far a little automation can take a business.

type-r4• 4 years ago

Solo founders like me are on the rise

source?

swyx• 4 years ago

This is clear to anyone with freshman macroeconomics - The Cobb-Douglas function for factor productivity:

Y = A * L^β * K^α

Value of your work depends on how well you wield capital (K) and labor (L).

Code, Cloud and AI have massively improved α while β is at generational lows.

tareqak2• 4 years ago

Thank you for mentioning something new to me: https://en.wikipedia.org/wiki/Cobb–Douglas_production_functi... .

galangalalgol• 4 years ago

Why do you think the output elasticity for labor is low? Is it a case of having to work a certain number of hours to get medical care? Is it the price of medical care? It seems like modern tools and automation would help it be higher?

dukoid• 4 years ago

Hasn't this been the case since the first machine or even tool was invented?

baxtr2• 4 years ago

Hmm, so his example is Instagram. But Instagram was sold to FB, sorry Meta!, in 2012.

Where are the new examples of that kind of startup? 13 employees selling for 1bn USD.

lotsofpulp3• 4 years ago

Musical.ly to Bytedance? And Qualcomm buying Nuvia?

baxtr2• 4 years ago

Good examples. Didn't know that Qualcomm was so small

tareqak2• 4 years ago

https://twitter.com/IlariKaila/status/1600120645211201536

Ilari Kaila

@IlariKaila

Replying to

@paulg

Why did you delete this banger?

Paul Graham

@paulg

Replying to

@IlariKaila

I forgot that mentioning Marx attracts angry fools. Since I could make my point without mentioning him, I just reposted it without.

bentlegen• 4 years ago

I always find this take that innovation wouldn’t happen in a non-capitalist society very strange, as if humanity hadn’t produced countless innovations before modern constructs like the corporation existed.

I also think its incredulous to focus on one (admittedly, very) positive outcome of capitalism without acknowledging its externalities, like pollution, inequality, etc. I suppose pg believes the current system will lead to a post-scarcity society in which none of those exist. Perhaps that’s true, but I hope the planet survives long enough to get there.

VictorPath4• 4 years ago

It's not like a socialist country could invent things like a satellite, and be the society that figures out how to send a man into space, probes to the moon and other planets - oh yaa, a socialist country is the first country to figure out those things.

VictorPath4• 4 years ago

Actually Marx talked a lot about automation. Marx's prediction was this would lead to a lower rate of profit for invested capital which - mainstream establishment sources say is what has been happening.

bowsamic• 4 years ago

Yes I have no idea why Paul would say this. I guess he realised he was wrong and thus he deleted it, but he won’t admit that. So many people online who make fun of Marx haven’t read any of Capital

VictorPath4• 4 years ago

It's a strawman argument for founders, but I am fairly sure it is made out of ignorance.

Let's say a sole founder buys $100,000 worth of Amazon Cloud, Nvidia cards, smartphones etc. Yes, one person is at the company, but others made those goods. The founder may not have directly exploited the person who made the smartphone they're using, but someone did.

Also, let's say I sell my small company which is well positioned in a fast growing market. The buyers are not buying based on what happened before, but on the future work and revenues that will be acquired from people working on the product.

At the end of the day there are people who work and create wealth and get a wage or salary, and there are idle class heir LPs who do not work or create wealth. The heirs survive on the wealth created in expropriated, unpaid surplus labor time of workers who do work. VCs front for the LPs, and founders deal with the VCs.

I don't think Graham even knows what he is arguing with. I'm not trying to make a convincing argument for the other side, but a clarifying one.

Incidentally, pretty much every economist up until the mid 19th century agreed with my view in some form - Adam Smith, Benjamin Franklin, David Ricardo - all the people who made economic arguments which economists still use. They said they studied political economy. It wasn't until the 1870s that arguments against new value being created by labor were started in full swing, although some of the ideas go back to the 1830s.

psychomugs• 4 years ago

His apparently original post, "automation is an inductive proof that Marx was wrong," along with that recent pseudophilosophical essay about "wanting what you want (to want)^n," concerns me as to whether he's jumped the shark.

stephc_int13• 4 years ago

I think PG is extrapolating/speculating a lot here.

Most of the "big tech" companies have surprising amount of employee, even pure players.

fvdessen2• 4 years ago

That’s a very short term vision. The founders and VCs are not any less automatable than their employees. I guess we’ll se how dearly they hold those beliefs when the AIs will own all the wealth

dandanua2• 4 years ago

In the limit case, you're left with just the automated founders.

fvdessen2• 4 years ago

Billionnaire automated founders. Think about all the hard work and risk those AIs will have taken to de deserve all that wealth !

zhouyisu• 4 years ago

Automated founders, automated managements, human battery, dream making machines. Welcome to the MATRIX.

milicat• 4 years ago

A capitalist fever dream to justify how valuable he is to society. Of course, he completely ignores the labour going into the entire supply chain that enables this level of automation. It's full of underpaid workers likely including some living under slavery-like conditions or in authoritarian dictatorships that don't even live up to his free-market ideals.

Slavaqua• 4 years ago

Totally, you still hear that feudals didn't deserve to be rich, because serfs created all the value. But the falsity of this claim become obvious as enclosures enabled feudals to use fewer and fewer serfs on their land.

alexanderballou• 4 years ago

I think it's also worth considering that automation will enable founders to grow companies with less and less funding.

moolcool5• 4 years ago

If we're going to devalue and degrade the labour of anybody who isn't "founder" because of its ability to be automated, then let's follow the thread to its logical conclusion and say that it's the only VCs who really "create value". Just as AI will be able to take the legwork out of turning a concept into code, coming up with these concepts might well be an even easier task to automate. Of course though, it takes a wise human to know which AI generated concept to fund, and in that spirit, let's all put our hands together for the billionaires who will define this future for is. Really give it up!

adamsmith1434• 4 years ago

Why not go all the way and replace the fallible, gullible, arrogant human VCs with much smarter AI VCs who can determine which AI generated companies are likely to succeed with higher fidelity?

moolcool5• 4 years ago

I think the more social/political/financial power possessed by the individual threatened by AI, the more resistance there will be to them being disrupted by it. Like look at tech's smug responses to truckers concerned about self driving, and contrast that to the perspective this tweet has toward everybody in tech except for founders. He's literally just insulating a ruling class. This class dynamic is so deeply ironic coming from someone who literally said that "automation is inductive proof that Marx was wrong". It's the opposite!

ojbyrne• 4 years ago

I feel like he’s missing the second order effect. If everyone can automate everything, then there would have been (or will be) 900 Instagrams and 1 (or 20) that would have had a $1000 exit.

tartoran2• 4 years ago

Early automators will obviously leave roadblocks behind them, new regulations regarding automation, etc.

adamsmith1434• 4 years ago

More fever dreams from the pus filled mind of PG. Imagine thinking employees create no value for a startup. The guy has been drinking his own piss for far too long.

neilv• 4 years ago

You still occasionally hear people saying that founders don't deserve to be rich, because their employees created all the value.

What I actually hear people saying (including at least one person from YC) is that founders need to share the potential wealth more fairly with early hires. With various rationales, including that execution is everything: having an idea and raising money for it isn't execution -- and the founders need the early hires to execute successfully.

But the falsity of this claim becomes increasingly obvious as automation enables founders to grow companies with fewer and fewer employees.

I'm not following the logic, but the initial assertion seems like it'd tend to be received sloppily, anyway. Whether founders deserve to be rich seems like a diversion from the usual question: why do founders with a successful exit get rich when employees get even less than they would've been guaranteed at a non-startup tech job.

In the limit case, you're left with just the founders. And we're not far from it. Instagram had only 13 employees when it was sold for a billion dollars.

So share the wealth with those 13 employees. "I have an idea for site/app" and getting some funding isn't worth a billion dollars. Successful execution is.

And a billion was if anything below market price. People mocked that deal at the time, but in retrospect it was a bargain.

Isn't part of the job of those founders to make sure the exit is at market value? Were the wealth spread around more evenly, so that everyone who made the success possible can get rich, the founders might have more motivation to get a good price. :)

(I suppose that an exception to this would be if a startup is actually closer to an investment scam, propped up by other startups in a portfolio as customers, and they expect all the workers involved to do only mechanical tasks in which individual creativity/ideas/brilliance/etc. doesn't significantly affect the success of the company.)

tartoran2• 4 years ago

why do founders with a successful exit get rich when employees get even less than they would've been guaranteed at a non-startup tech job

This is the question that if addressed would fix the whole startup scammyness and exploitation. But then it may as well kill startups.

PinguTS• 4 years ago

This is this thinking of "Automation reduces workforce". The next argument then is always "We need Basic Income" because of this.

But this is ignoring the fact that automation never replaced workforce as such. It moved the focus of the workforce. At the end more automation even required more workforce.

The thing is, you cannot engineer the process to be automated. You need to keep maintaining the automation. This includes not only daily maintenance, but also to keep up with obsolescence. You need to keep-up with new upcoming technologies of automation to replace your old once. But all this distracts and takes-away focus on the development of you product. So you need workforce to basically run your business, while you can still stay focused. But even then you can't stay focused, because it is also your job to decide what newer automation processes to chose. As this will have an impact on your own product. That again takes away you focus for the development of you product. So again you need workforce to help you to stay focused. At some point you need workforce to manage your workforce namely HR.

So there is a cycle when you get more and more workforce so that you stay focused to develop your product.

All that of course assuming that you need to develop your product even further after launch.

lancesells• 4 years ago

How many people here have simpler jobs than 10-20 years ago due to automation? I work in marketing and I all I see is more apps and more complexity no matter how "automated" things get.

gremlinsinc2• 4 years ago

I'm a developer and honestly ChatGPT and GitHub copilot handle 90 percent of the frontend/templates and 40 percent of my code is now somehow enriched by ai. It's remarkable and has helped cut way back on burnout.

chinchilla2020• 4 years ago

I have to agree here.

Automation increased the productivity of employees, and drove down the price of goods. It never truly 'reduced' the size of the workforce. The industrial revolution actually led to an increase in the size of the workforce. New qualifications were required to handle technically-complex industrial equipment instead of the simple production methods of the pre-industrial world.

moooo99• 4 years ago

The industrial revolution actually led to an increase in the size of the workforce. New qualifications were required to handle technically-complex industrial equipment instead of the simple production methods of the pre-industrial world.

This is generally true, but also ignores a key difference. When processes first became mechanized and then industrialized, they we're fairly similar in their nature. Sure, they were different and did require some qualifications, but in the end the imaginary jump from a blacksmith to someone who works in an manufacturing plant building components out of metal is not too severe. With the increasing automation, the jump would be from a machine operator to a software engineer/automation engineer. While this are certainly all teachable skills, they require an extremely different skill profile than the ones they're replacing.

Overall, automation is nothing new. And although the capabilities continue to develop from a manufacturing standpoint, there is nothing disruptive about most new things in that area. With the tasks that are currently not automated, the cost is mostly the limiting factor, closely followed by technical complexity. And while there is certainly some change in terms of costs coming down thanks to technological advancements, it's still not completely disruptive. But that is all for blue collar work.

But what I think is overlooked way too often overlooked is white collar work. Working in a large company myself, I very frequently witnessed people whose job was essentially the human equivalent of a for loop with a bunch of if conditions. These jobs were hard to automate efficiently, mostly because of the lack of consistently digitally accessible process artifacts, but that is continuing to change. As (traditional) companies continue to shift towards completely digital business, it will become increasingly easy to automate "paper pusher" jobs like these.

Beyond that, I hate to be that person, AI will likely have an impact as well. Recent developments, namely GTP-3 or ChatGPT, have shown the current level of AI. And while there things to be criticized about those models and their abilities are still limited, they are significantly more advanced than what most people (outside of those closely following) deemed possible. And while they lack the creativity for original work, these models are already very good at transferring knowledge. And considering that many jobs don't necessarily need original problem solving skills, I can see how automation can have an impact there. It might not completely automate people away, but it certainly has to potential to boost productivity significantly.

But will it really put many people out of jobs? Who knows. Given the less than ideal demographic structure of many (european) countries, companies operating here do certainly need any productivity boost they can get. As for countries without those demographic issues? Who knows.

Generally my experience in automation projects: the people who many think will be the first ones to be automated away, the people doing the actually physical work, are significantly safer than the ones not expecting it. No matter how much AI or 3D printing houses you throw at the problem

yobbo3• 4 years ago

But this is ignoring the fact that automation never replaced workforce as such.

But it actually did. "Workforce participation", which might be the closest metric of what we actually mean here, keeps declining. In addition to that, we have the era of "bullshit jobs".

musingsole• 4 years ago

Source: https://www.bls.gov/charts/employment-situation/civilian-lab...

Workforce Participation (a per capita metric) decreased. Starting from 2002 with a participation of 66%, the US employed ~192 million. But in 2022 at a participation of 62%, the US employed ~203 million.

Absolute employment is up. Between that and productivity gains, more work is being done today than ever before.

KptMarchewa3• 4 years ago

keeps declining

Where? It's highest in the history in Poland, Germany, Italy and very close to the top in UK. US is the outlier, even there, it kept increasing after 2015 and just the pandemic dropped it. Even then it's higher than before 70s. Even in aging Japan it's very close to top.

altacc2• 4 years ago

Yes, automation is nothing new and we're all still working. It changes the jobs and then typically the company can use the gain to expand and so needs to hire more.

pixl974• 4 years ago

and we're all still working

Because governments attempt to maximize 'job creation' via a number of methods including tax benefits to businesses. Businesses don't really give a shit about unemployment unless it is too low, they benefit from low wages when it is high. When unemployment is too high the government risks getting burned to the ground by angry mobs with pitchforks and tends to optimize around preventing that.

WitCanStain2• 4 years ago

We could eventually replace (parts of) the workforce if we were happy with the current standards of living (and prevented a small group from hoarding all the wealth). If we were satisfied with a 1850s standard of living, only a small portion of the modern workforce would need to work. What automation enables is greater productivity with the same amount of human effort/time. But because we seek to improve out living standards, we need to keep the same portion of people employed and productive. So I say, once we bring everyone to a decent standard of life, we can just stop and gradually liberate people from the shackles of work until society runs on a bunch of robots and a small core of maintainers.

stemlord• 4 years ago

automation never replaced workforce as such. It moved the focus of the workforce

Seems true but also doesn't automation diminish the diversity of work available?

oblio4• 4 years ago

It does, primarily by raising the floor.

foul• 4 years ago

I can't do anything but reject his claims when he presents Instagram as proof. It's crazy to think seriously that the value was created by the 13 employees + founder of an electronic glossy billboard. Influencers and advertisers indirectly treated as cattle. Goddammit Paul.

ohyes• 4 years ago

Well, it requires fewer more skilled employees. Employees some of whom could be founders themselves and compete with you. So despite the number of employees being lower, their opportunity cost is likely similar or higher, just more concentrated. Therefore what you’d have to pay them if they were negotiating rationally is similar to what you’d pay multiple people.

The limit here is an edge case, it’s like dividing by zero. Sure if you can automate everything the founder gets all the profit. If you only have 1 employee, however, that single employee is immeasurably valuable and has some incredible leverage on you (you’re screwed if they walk). There’s a net benefit to the employer to having a certain amount of redundancy.

So this whole argument (to me) toes the line of sophistry. It just gets a big eyeroll and me thinking Paul is out of touch.

vishnugupta• 4 years ago

automation enables founders to grow companies with fewer and fewer employees.

For sure, it's easier to launch a product with no employees. However, the challenge is to grow. That's when founders' run out of ability/patience to coax more out of automation tool. Edge cases appear more often; systems start breaking down; tools don't have meet their exact need anymore etc., That's when they start hiring these "tool experts". SAP consultants, AWS certified DevOps, Stripe Integration Engineers and so on. Also, at scale maintenance starts becoming a bigger challenge compared to new feature/product launch. So one needs to hire maintainers. As David Graeber astutely observed a glass cup needs to be produced just once but must be washed thousand times. Let's not forget one needs employees to maintain automation tools too.

I can cite plenty of real world examples but let's just look at Uber. For an outsider it seems like a tech company but internally it is run by a massive operations team. They are constantly in touch with drivers, address their problems, move drivers around to meet higher demand, map operations and so on.

What is happening however is these SAP consultants are paid significantly less compared to their Business Analyst (or equivalent domain expert) counterparts. So in some ways profit is being cornered.

All that said this is an extremely narrow view about IT sector. Look around; EV, solar energy, genetics, and so on. No automation happening there. If IT sector needs less employees, then it's only for good! Skilled labor is needed elsewhere too.

Devasta• 4 years ago

The employees are still there, just because they are in an AWS facility instead of two doors down from you doesn't mean they don't exist.

encoderer• 4 years ago

I can attest that we’ve grown a SaaS a lot bigger with 3 people than I ever would have thought possible.

memish3• 4 years ago

Paul Graham founded this site. How did it end up being so hostile to founders?

satvikpendem7• 4 years ago

It's become a more general site for tech employees rather than founders. Notice how most of the comments are employees talking about how this kind of opinion affects them. To be honest, I don't know where founders reside these days, Indie Hackers was a good site but it has a lot of spam and people posting links with little discussion nowadays.

reducesuffering• 4 years ago

If you can get into YC, then BookFace.

p0pcult• 4 years ago

Because people woke up from the fiction that venture capital is about making the world a better place.

oblio4• 4 years ago

As p0pcult said, people realized that VC is about concentrating wealth.

As a counter example, Microsoft's IPO made a few billionaires and tens of thousands (!) of millionaires, and that was in 1986 (so take inflation into account, it's been 36 years).

How many of these modern exits have made the lives of so many so good, with all the dilutions?

A4ET8a8uTh0• 4 years ago

I will admit that I assumed a lot before I read the whole thing ( I was kinda hoping it will be more about automation ), but I guess it goes back to the opening statement:

<< You still occasionally hear people saying that founders don't deserve to be rich, because their employees created all the value.

I don't hear that a lot. I see 'Eat the rich memes', guillotine pics popping up on various community sites. PG may be very limited in his view to VC-land only ( and if that is all he is talking about, he may well be right ), but if he is making a statement intended for general public, lets talk about not getting the current mood. The argument itself seems off, but I am having a harder time finding where it fails.

ausbah• 4 years ago

automation only scales to a certain point though? after a certain point of scale it makes sense to do something in house & save money at the margin right?

automation seems great for small companies & solo founders, but kind of an open question if that gets you to unicorn status

paxys• 4 years ago

It's easy to make any argument sound valid when you tout the extreme outliers (Instagram & WhatsApp in this case). What about the average case? What percentage of founders have grown their company to $100M+ revenue or $1B+ valuation on the backs of "automation" (whatever that is)?

spicymaki2• 4 years ago

Feudalism without the serfs. What is in it for the plebs?

The idea that concentrated wealth is great for everyone and will trickle down has been pretty much debunked to the point where the wealthy are openly stating we don't need the masses anymore.

The crypto dystopian nightmare of generating money with zero utility backed by quantitative easing demonstrates that you don't actually need many employees to generate wealth. You don't even need commerce, financial engineering will suffice.

Employment is a social contract. Business owners and investors (who control capital) are supposed to provide a means for the masses to live in comfort, the employees give there labor and time in return. The wealthy get to live in their mansions, vacation on their yachts, etc. We get to buy our homes in the suburbs, raise our families, etc.

What happens when no one works and humans are removed from the value chain?

jmagoon3• 4 years ago

Massive social upheaval that the super wealthy think they are immune from, even when they are directly responsible for its creation.

cal85• 4 years ago

The idea that concentrated wealth is great for everyone and will trickle down has been pretty much debunked

Can you point to an example of someone claiming that concentrated wealth is great for everyone and will trickle down?

skinnymuch• 4 years ago

https://en.wikipedia.org/wiki/Trickle-down_economics

There’s lots of people saying it and have said it. We just had tax cuts for the wealthy recently.

jahewson3• 4 years ago

Liz Truss, who brought in tax cuts for the highest earners based on this idea, and as a result lasted only 45 days as prime minister of the U.K.

See also: Margaret Thatcher, Ronald Regan.

ryandrake2• 4 years ago

It can be helpful to think of the USA as a giant factory that produces billionaires. Dollars and workers go into the factory as inputs, billionaires (and defects, millionaires) come out on the assembly line, and the system's waste product that gets discarded is the lives and livelihoods of working and middle-class people. So the system is working and producing what it is supposed to produce.

danenania5• 4 years ago

There is also the small matter of the goods and services produced that improve standards of living for everyone in the US and the world.

TapWaterBandit• 4 years ago

This is one of the dumber takes I've ever seen on hacker news. Completely blinded by envy.

Where do you think all this stuff comes from exactly (or how is it paid for):

- the food in your pantry

- the stuff in your home

- the vehicles/PT you use to get around in

- the devices you use

- the content you watch/play

- the utilities you use to power it all/get water

- the services like banking you use

- the clothes you wear

- all the other forms of infrastructure like medical care/policing/fire brigades

stackbutterflow• 4 years ago

What happens when the mass is struggling and has a lot of free time because everything has been automated? The billionaires seem to not have planned more than one step ahead.

jaredandrews• 4 years ago

Oh they are planning...

https://www.theguardian.com/news/2022/sep/04/super-rich-prep...

danenania5• 4 years ago

That's where basic income comes in, hopefully.

That said, it is no by no means a certainty that increased automation will reduce the overall number of jobs or rate of employment. It has never done so in the past.

onemoresoop2• 4 years ago

What happens when no one works and humans are removed from the value chain?

pitchforks?

type-r4• 4 years ago

i don't think anyone is claiming it's going to trickle down

altacc2• 4 years ago

If his example is Instagram then the lesson is that you didn't use to need many employees to get rich via venture capital and buy out, which are the main goals of many tech founders. Instagram and tech in the early 2010s is not a company or sector that represents the wider economy.

Instagram in 2012 had 30 million active users and zero revenue. That's $0 value earned per employee; these days it's just under $2 million per employee. The scale is vastly different and they couldn't still be running with so few employees. And let's not forget that Instagram was bought as it was seen as a threat to facebook. That it was seen as worth a billion dollars is exactly the problem that many people are referring to about creating overnight billionaires but overvaluing digital companies, which would be worth much less if they were brick & mortar companies.

That said, there are a lot of great tools out that that allow people to run companies with off the shelf software and no code applications, which I think have the potential to make a bigger impact on software development than AI. Companies using new technology to become more efficient is nothing new, it's as old as work itself. The steam engine automated a lot of work but still required workers, just like automation tools require another company's employees to build. Growth creates more employment and automation moves those roles elsewhere. The problem is more that those employees that the enriched founder does need working for them are disrespected and paid badly as they are seen as just cogs in the machine who should be happy for the breadcrumbs tossed to them. Doesn't matter how many employees you have, if the founder is getting rich they can afford to pay their staff well.

v3ss0n• 4 years ago

ChatGPT would enable founders to Solo soon.

PaulWaldman• 4 years ago

This reflects increased maturity and thus the transition to more specialized labor. It is akin to early craftsmen assembling cars and transitioning to assembly lines.

Automation tools that provide APIs to allow founders to increase their leverage are produced by other developers who specialize in said tools.

Ideally, this allows the most efficient use of resources, everybody wins. Those who are great at building tools can do so and these tools can be used by many organizations. Pessimistically, there are some who get squeezed out of the production equation.

Should a startup develop their own accounting system? Unless they are in accounting, probably not. But there will hopefully become a point where a founder needs to bring in resources, internal or external, to manage the accounting system. This is a further extension of that.

FpUser• 4 years ago

I have a company with my own product. I wrote software, rented servers, designed hardware and placed orders to a couple of small factories. I have partner but he mostly handles business matters. No employees. We do hire contractors every once in a while for particular sporadic jobs (like design pics for website, create campaign page, assemble hardware from parts etc. etc). So yes no employees thanks to technological advancements.

not_gpt4• 4 years ago

As Peter Thiel has pointed out, the reality is that founders take on incredible amounts of risk and put in long hours to build and grow their companies. American exceptionalism is founded on the principle of rewarding hard work and entrepreneurship, and founders who succeed in building successful companies should be celebrated, not demonized.

thundergolfer3• 4 years ago

on incredible amounts of risk

These days 9/10 founders only take on opportunity risk. In real terms, they take on a tiny amount of risk. Undocumented immigrants on the other hand, that's risk. Astronauts, yep, an incredible amount of risk. Founders, no, just hard work.

jahewson3• 4 years ago

We’re talking about financials here so it’s referring to financial risk. A highly-qualified and skilled founder is forgoing the guaranteed opportunity to make $1m+ in the time they choose instead to work on their startup. They also risk harming their future earning potential and career prospects if they don’t already have a track record of success. A low-paid worker in this imaginary situation isn’t risking much of anything financially as they’ll (hopefully) get minimum wage either way.

(In practice a lot of small businesses owners use debt and that is where the financial risk lies for them).

iamdbtoo• 4 years ago

While employees at startups don't take on the exact same risks as the founder, they do take on personal risks when joining one and I think the reason founders are demonized is because they regulary ignore this fact, especially when it comes time to divvy up the cash.

Joel_Mckay• 4 years ago

22/23 founders ride their company into the ground, or hit the $100k/year marginal profit glass-ceiling. This remains true regardless of the amount of investment in time, labor, and or infrastructure.

If you don't talk to people that know these facts, than you are almost guaranteed to repeat the same tantalizing yet bad choices.

Automation only tends to make things more feasible, but sometimes bankrupts the firm in the process.

Cheers =)

throwaway5874• 4 years ago

I tried to hire a few freelancers to do nothing but collect information from stores. Easiest job and offered good pay but no takers. I dumped the idea and since then i work on ideas that require no outsiders hand.

I refreshed my machine learning skills and using it to solve my problems or else i just deliver half baked product.no intention of hiring anyone period.

acaloiar• 4 years ago

You still occasionally hear people saying that founders don't deserve to be rich, because their employees created all the value.

Nobody is saying this. As evidenced by several threads here, opinions are far more nuanced.

fleddr3• 4 years ago

Graham will always defend founders "deserving" their wealth, as if it is some technical argument rather than a political one.

It's an entirely subjective point. If a solo founder with some very powerful machinery (cloud, AI) produces a lot of economical value, it's quite questionable to attribute that value solely to the human being pushing the button.

Even more so when that human has exclusive access to the key input for the machine: capital. Somehow all investment capital has ended up in the hands of about 100 people, which is then gatekept and redistributed to founders "advancing society" with unfortunate side effect it producing even more money for the people that can't seem to get rid of it.

Surely that starting point, that capital concentration, is justified based on pure merit and brilliance, these people being a 100.000 times smarter than the average person? Or was it because they were insiders of the financial system, riding the bust and booms of our perverted stock market whilst producing zero tangible value?

As for the point of labor, you operate machinery largely based on open source. For which you will not pay a cent whilst said open source maintainers can barely make ends meet and instead of praise, gets lemons. As for your fancy AI model, you trained it on other people's labor, and again refuse to compensate. And yet still you dare to claim that all this value produced is yours to keep.

As for "advancing society", we can take a clue from China. They concluded that whilst SV for sure pumps around a lot of money, it's frankly a joke. Tech that produces addiction and ads, undermines employees (Uber, food delivery), externalizing all negatives to society as "people that add value" tend to do. So China killed most of the sector and refocuses on serious tech. Tech focusing on actual human needs. Supply chain, health, mobility, infrastructure. I know, weird concept.

Bottom line, if I were a filthy rich founder, I'd totally shut up about it and hope nobody notices.

threeseed• 4 years ago

Graham only seems to defend the successful founders.

He doesn’t seem to care very much about employees who have their own side projects or aspiring founders.

fleddr3• 4 years ago

Of course he doesn't, he's a billionaire venture capitalist. No billionaire cares about fair value contributed because that idea is incompatible with the idea of being a billionaire.

dctoedt• 4 years ago

Graham falls into the same trap said to have been experienced by Milton Friedman, who "celebrated drivers and took roads [and cars and gasoline and ...] for granted," according to NY Times economics correspondent Binyamin Appelbaum in his book, The Economists' Hour.

http://www.economicprincipals.com/issues/2019.09.01/2253.htm...

alangibson• 4 years ago

PG is one of the most important bishops of the Cult of the Founder. This is more of the same.

We should recognize that he, by popularizing this world view, has done as much as anyone to empower the SBFs of the world.

swellguy• 4 years ago

Weird space to wade into, as wealth inequality is no joke worthy of tweets.

d00mer• 4 years ago

Doesn't the "automation" usually mean hordes of low-paid people in India and elsewhere doing it?

revskill• 4 years ago

One important thing to know, is knowledge sharing actually creates value. But yes, a company will increase its value internally if it has culture of sharing.

snowwrestler• 4 years ago

This is specific to startups. If you can define a business model that is somewhat unique and successful, you can scale really quickly and hopefully exit before your expenses catch up to you, like Instagram and WhatsApp did.

Expenses eventually catch up with you, because business is adversarial. Any technology available cheaply to you to scale your business is also available cheaply to your competitors. Once other smart people start going after your market share, you will need to spend more to defend it and continue to grow.

Expensive things: invention, sales, marketing, customer service, compliance, content moderation, etc. These all have to be done by humans. A lot of companies who scaled their revenue rapidly with low head count, have then had to scale their headcount to maintain their business. (Google, Facebook, Netflix, etc)

The founder with no employees is for sure an attractive fantasy. It's basically the core of the superhero myth: a person who has a big effect on society without depending on anyone else. Superman doesn't need help because he is invulnerable and strong. Even superheroes who ostensibly depend on large teams, like Batman or Iron Man, are never shown that way. If you go back to the beginning of the MCU, Tony Stark is alway shown alone with his technology. It's the bad guys who bark at subordinates and run around in groups.

nonrandomstring• 4 years ago

Founderless companies are the real future. Having to divide profits with founders, shareholders and other meat beings only weakens a company. Surely nobody supposes business knowledge is somehow immune to encoding in AI? And mistakes won't really matter when you can spawn a swarm of 300,000 "subsidiaries" from a single shellscript and have them coordinate via a darknet protocol to underwrite each other's losses.

1MachineElf• 4 years ago

The barrier to entry for becoming a founder has been lowered, meaning more people can become founders. Sounds good to me. I hope this point isn't being overlooked here, although, I understand that with recent waves of layoffs across tech, taking away people's jobs is a sensitive topic.

bokohut• 4 years ago

As a serial entrepreneur and founder in the technology realm my past matches his claim exactly.

The first founded iteration was spent observing and learning what not to do and over time grew to around 100 employees at peak. The second founded iteration I re-architected and re-coded the entire platform in about four years automating out all possible employees before going live which peaked at 7 employees under my ownership. And as they say "Third time's a charm". ;)

From my own personal past experiences, and YMMV, people are the problem. Computers only make mistakes that the software allows which comes from the human writing the code of course until GPT3 starts coding:) Computers do not know of opinions, politics, emotions, illness, image, etc and if businesses were to track and quantify this as to the impact of said business then many eye opening considerations would occur. Just because "It has always been this way" does not make it correct or, from my direct experiences, efficient. Per Edison: "There is always a better way."

I am the exception however as I have been doing real hands-on work since about age seven and have always been the first person to jump into anything to get my hands dirty learning whether that involves ICE engines, electricity, plumbing, digging, and of course anything tech related. I love to learn and have a passion for solving the hard problems which is my downfall but I don't do it for the money since that cannot buy health nor happiness.

treis• 4 years ago

He's right about automation being good but misses the dichotomy between capturing value and creating value. Instagram was worth billions because they won in a market that is lucrative and tends towards winner take all. To use a somewhat bad analogy, you don't create a billion dollars of value by winning the powerball lottery.

dgudkov• 4 years ago

I have a feeling that PG doesn't understand automation. Automation is just a tool to increase work productivity (and, consequentially, profits and salaries). Automation doesn't change the nature of relationship between an employer and employees. The fact that a founder might need fewer employees due to automation only means that the moment when the founder will need to hire more people is shifted later in time (when the company grows) and the salaries of the employees will be higher because they will be required to work with automation tools and their work productivity will be higher.

Also, the more automation we have, the more people will work in the automation industry. In other words, people will still be hired, just from the side of automation supplier, not automation consumer. If a single founder can run a billion-dollar company, it means that the automation industry that enabled this remarkable achievement has grown big and gave work to many people.

jmagoon3• 4 years ago

These blue check VCs on twitter are on such a gnarly anti-human bent these days. They are targeting a capitalist maximalism where a few people are very wealthy and everyone else does nothing (except...consume SaaS products? where do they think customers come from?). They are so absolutely caught up in AI development speed that they have traveled all the way to techno-eugenics, totally eliding the problem that there are a bunch of humans in the world that can't just be "disrupted" without their nightmarish little automation empires being seized by force.

If these were far leftists talking about the need to reduce human capability because of the climate they would be rightly derided as being eco-terrorists, and that's precisely what we should see these people as. Ultra-libertarian terrorists whose primary, unabashed goal is to enrich themselves at the cost of human society.

satvikpendem7• 4 years ago

As a founder, it's true, if I can run a solo operation, I want to do that for as long as possible. New automatons like Stable Diffusion and ChatGPT enable that so they're great for me. Just the other day I asked ChatGPT to solve a particular programming problem for me and it did, all the while explaining what and why each line of code existed.

There seems to me to be a lot of moral panic in this thread, I don't think it's necessarily justified simply because people are annoyed at PG as a person or what he said specifically (about Marx or otherwise) or the way he phrased it, because the general idea he's writing about is completely true in my experience.

whateveracct• 4 years ago

Paul Graham saying the quiet part loud as usual.

zetazzed• 4 years ago

This attitude makes me so sad. When I started in tech, people were proud that this was one of the few industries that shared equity with a broad base of employees. Seeing a parking lot full of Porsches was celebrated, and people loved stories of the secretary (or mural painter in the Facebook case) who got rich off their options.

But PaulG seems excited about the days when the pie can be captured by fewer and fewer people, specifically those in the class to which he feels closest (founders). It's a very strange argument about perception too - people are consider billionaires undeserving of enormous wealth, but just wait until they share that wealth even less broadly! Then everyone will see how great they are and love them more, right?

onemoresoop2• 4 years ago

It is sad indeed and many of us feel used and discarded. But maybe this will have a different outcome than we envision. Maybe the capitalist class can be automated away too

Axsuul• 4 years ago

It's not a zero-sum game here. Being able to do more with less is a huge win — this enables individuals and small teams to tackle niche problems that would've otherwise been ignored. But there will always be an endless stream of universe-scale problems that require massive hordes of people to solve.

moolcool5• 4 years ago

Someone seeing automation tools and saying “cool! This will centralize wealth even more, and that’s a good thing” is quite revealing

civilized2• 4 years ago

And automation is enabled by a massive web of technologies made possible by government-funded research. So it seems that, by Paul's argument, it is justified to have very high taxes on the incomes created by these founders with these technologies.

The people, via their government, invested in modernizing and automating the economy, and they deserve to now reap the rewards and redistribute them broadly to the people, who ultimately funded the government research.

Certainly the founders make some contribution as well, but since they are standing on the shoulders of giants, a progressively smaller cut, perhaps as little as 1-5% for incomes above say $10 million, would be very justifiable. Whether we actually enact marginal taxes of 95-99% above $10M would reduce to technocratic questions of incentives and who puts the money to the best use. Just desserts would be out of the question.

Right?

Vt71fcAqt72• 4 years ago

Did the government sell these technologies? If not then how do the people make money from it? Sounds like the government gave it away for free: how can they now charge for it? Especially since tbe government mainly researches ideas rather than products. Should we pay Gutenburg's estate every time we print something? Perhaps Feynman gets a cut from nuclear power plants? Last I checked patents expire after 20 years. If the government has patented any technologies that are active, sure, let them charge for it.

civilized2• 4 years ago

I am talking about how an equality-promoting system can be justified because I see that as desirable. In doing so I am showing that Paul Graham's view is not the only valid view about what people "deserve".

Anyone who sees it as desirable to give enormous amounts of money to Feynman or Gutenberg's descendants is free to advocate for that as being what they deserve.

zacharyvoase• 4 years ago

In a follow-up tweet: “ In the limit case, you're left with just the founders. And we're not far from it. Instagram had only 13 employees when it was sold for a billion dollars.”

Why stop at the founders? Why not just have an algorithm churn out ideas for companies, an AI to build them, and another to launch them? What will Paul Graham do when even his job, as investor and producer of thoughtless observations on technology, labor and capital, has been automated away by an AI capable of writing similarly valid-sounding but uninformed takes?

Vt71fcAqt72• 4 years ago

Whoever has the algorithm is the founder

qwertyuiop_• 4 years ago

Then why have a co-founder as YC preaches ?

random314• 4 years ago

And who was it that created the automation? The automation just creates itself?!

That was such a terrible take.

mattjaynes2• 4 years ago

Wow. There seems to be 2 main responses to this. 1) Sadness and depression or 2) Excitement and possibility

I really expected this thread to be more of #2 since historically Hacker News has been full of ambitious founders and founder-like engineers.

The great leaps in automation, especially with the recent AI developments is any founder's dream. To be able to go faster with less friction than ever to create something valuable for the world. Now this is within reach of even more people.

It's an amazing time - for those who choose to see the possibilities.

nonameiguess• 4 years ago

We can't and will never have a world with 8 billion distinct businesses that all have zero employees each. So it's nice that you think you might have a shot at a tiny lottery, but personally, I like to see trends that can benefit all of humanity, not just those who choose to start businesses.

Nothing against automation itself, but the idea that it means all of the value of a business can and should accrue to a single person I take issue with. It doesn't matter how evenly spread the probability that a randomly chosen person can become a successful founder is, or what my personal probability is. The total number of such people is necessarily capped at a very small number, and there is nothing to celebrate about at the idea of a future where only a very small number of people can ever enjoy the wealth created by automation.

mattjaynes2• 4 years ago

Or maybe stop worrying about theoretical macro trends and go build something valuable right now?

pixl974• 4 years ago

HN suffers from a higher than average amounts of narcissism when it comes to being "Temporarily depressed millionaires" when thinking they will be the ones at the top of the pyramid. The few here that are near the top of the pyramid seem to forget that their high position tend to forget that position is supported by the base below them and if they don't perform maintenance on the base the entire thing collapses.

Humanity is built on societies and we must treat it so by ensuring we produce wealth and distribute, not extract wealth and horde it.

avidphantasm• 4 years ago

If it becomes possible for a solo founder to automate a $1B start-up, then it's not worth $1B dollars, because the barrier to entry for others to do the same is much lower. The whole startup thing would seem to implode because of this.

The argument they are making seems to be founded on the idea that founders are unique geniuses. Maybe they are, maybe they aren't. I guess we'll find out if there are no more such founders as IT automation advances.

crispyambulance• 4 years ago

Well, there’s “deserve-to-rich” and there’s “deserve-to-be-so-rich-that-you-can-afford -bend-reality” rich.

Can we NOT pretend that the people pg is talking are saying the former? It’s so disingenuous.

dalbasal• 4 years ago

I feel like the implied question isn't of much value on its own. It's all about "where are you going with this?"

Leaving aside the connective tissue between creating value, creating market cap, how these translate to reward/money... What's left?

The subsequent discussion about dividing loot is one discussion. The discussion about making more unicorns might be totally unrelated. The latter is theoretically empirical, but in practice pretty speculative.

My take on these is usually about bottlenecks. A screw holding together a $100bn f35 is still usually cheap. Its importance doesn't determine price, because without scarcity it cannot be a limiting factor. A patent protected screw could, in theory, be priced to reflects value to the buyer/aircraft. A custom designed screw might also be expensive... perhaps reflecting the time value or negotiating power of it's custom maker.

In all cases the plane does not work without the screw.

If we're reviewing costs and such, the above thoughts on "value" might have value. They may even hold clues to cost efficiency more broadly. They may not be too relevant to a discussion about aviation mechanics.

I (respectfully) think pg's pov is too abstract, as is the proverbial opposing pov that he's responding too.

Look... Investors tend to think the bottleneck is "great founders," the modern version of investment opportunity. A lot of founders tend to think that it's investors. Perhaps the bottleneck is corporate and government procurement. Military people and other tribes tend to think the bottleneck is leaders. Economists think bottlenecks are institutional. All convenient viewpoints for the people who hold them.

I don't really understand how automation relates. Unless we're talking about founder-only companies... Why is this points in favour of founder contribution, relative to the (now fewer) employees? Maybe it means that capital's value has risen. Automation is "capital" technically. You might even claim that the public is responsible for more of the value, considering the importance of public domains to technology.

marstall2• 4 years ago

And yet automation has led to an ongoing explosion in the number of jobs since the dawn of the Industrial Revolution!

medellin• 4 years ago

Has he always been like this? It seems he is posting more and more polarized content over time or at least its being shared more. Maybe that is the point?

jahewson3• 4 years ago

You still occasionally hear people saying that VCs don't deserve to be rich, because founders created all the value. But the falsity of this claim becomes increasingly obvious as automation enables VCs to grow funds with fewer and fewer founders.

bitwize• 4 years ago

Marx thought of that too, which is why he said there'd be a revolution.

alvatech• 4 years ago

What about competition? What prevents multiple copycat companies from propping up if a one-person startup grows to a billion dollar valuation?

madsbuch• 4 years ago

Who pays for the infrastructure?

I can drive 10 times faster with good roads because a public sector maintain and build road infrastructure. If that enables me to earn 100 times more am I then entitles to the entire profits? Or should I pay some of it forward to the infrastructure.

I like the idea that innovation advantages should spill over to the rest of the society with the speed of inflation. Given an inflation of ~2% it should take me roughly 50 years to not gain any profits from my innovation (given no competition).

pixl974• 4 years ago

"Well you see after I become a billionaire I'm going to pull up the ladder behind me and move to a private island. Good luck everybody else."

98codes• 4 years ago

Well that's fun -- I'm apparently recently blocked by PaulG, having never interacted with him directly, or anywhere near him in any recent memory. Is he running something to proactively block anyone that's been talking about Mastodon?

Wild-ass guess, but I can't imagine any other reason.

drewcoo2• 4 years ago

But do we need human founders? For how long will we still need them?

choeger2• 4 years ago

Instagram the software has no intrinsic value. The whole thing could be reproduced in no time. It's the network effect that matters and getting that effect is essentially a hack. Yes, the author's prime example is a hack of society.

That's not automation, it's an example for the fact that software can be copied for zero cost.

Compare that to a company with an intrinsic value, like Tesla. How far could Elon (I know he's not the founder) automate Tesla? Even if all tools for such an automation were available, how would a single person even know how to design and build a car, let alone the required automated factories?

type-r4• 4 years ago

so if something can be reproduced in no time it has no intrinsic value?

choeger2• 4 years ago

In principle, and if "no time" also implies "no rare resources/tools", then how much would you pay for it?

If someone tried to sell you breathable air on the street, how much would you pay for it?

kbos872• 4 years ago

This whole notion seems to be based on a bunch of seemingly logical conclusions, but it’s also a very narrow view of the reality.

Let’s just think for a minute about a single potentially confounding factor - every company has competitors. Those competitors are looking for every opportunity to climb past you, and they’ll be willing to hire humans to do anything a machine can’t.

For example… a lot of people still prefer to talk to a human when they need help with something. (Not me and I’m guessing not many people on HN, but we’re the outliers here.) Yes, you can try to use automation to solve for that… but if your competitor offers a better experience through human intervention, you are essentially forced to match their move and hire a support team.

Yes, automation is getting better, and who knows, maybe in a few years GPT3 will be having support conversations with customers. But the pressure to find a competitive advantage is often going to lead to hiring large numbers of people. That’s how we got to where we are today.

danielmarkbruce• 4 years ago

Great point. People don't appear to think about competition enough.

a9h74j• 4 years ago

But the pressure to find a competitive advantage is often going to lead to hiring large numbers of people.

Phone menus are not generally viewed as competitive advantages, I suppose, but we have them in plenty.

Would it be the standard chatbox case that competition for now is against hated menu trees, not against human beings?

kbos872• 4 years ago

Agree with your point but if the alternative is a vendor that leaves me with no way to get my questions answered, I think most people would gladly step through a phone tree to talk to a human being.

browserman• 4 years ago

Every time some VC asshole makes some pompous self-gratifying pronouncement like this, their personal capital gains tax rate should go up 10%.

EDIT: Just astonishing that uses Instagram as an example. Quick question: After Facebook paid a billion dollars for it, did they a) continue to employ only 13 people or did they b) hire more fucking people in order to actually realize the potential of their investment?

EDIT2: Just saw that he also claims 'automation accumulating wealth in the hands of the ownership class at the expense of workers' contradicts Marx. Amazing. Paul, if you're reading this, please take an introductory class on Marxist thought at your local state college, or have your personal assistant take it and send you the notes.

cma• 4 years ago

Users are effectively the employees often in these companies, they just get zero pay or huge fees on something they are forced to sell through the locked in platform.

Automation enables founders to grow companies with fewer and fewer employees

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